U.S. refiners in particular will benefit from regional tailwinds, Wong said: they sit on "abundantly cheap" natural gas and crude oil which, along with regulation rollbacks by the Trump administration, will allow them to gain market share.

In line with this view, Wong upgraded Valero, citing the company’s high-quality exposure to the current refining upcycle, low cost structure and growing exports.

The upgrade makes Valero one of Morgan Stanley’s top R&M picks along with Marathon Petroleum Corp (NYSE: MPC).

Price Action

Valero Energy shares were up 4.7 percent at $120.36 at the time of publication Thursday morning.